Shares of Savvis Inc. (SVVS) soared 20 percent Wednesday after the managed hosting firm reported strong second quarter earnings, prompting an upgrade from an analyst. On Tuesday Savvis announced second quarter revenue of $212.9 million, a 13 percent improvement from the same period a year earlier (not counting asset sales that boosted 2Q07 results). Revenue from the company's new data centers doubled to $14.2 million.
The strong performance reassured analysts, including one who had downgraded the stock in April after disappointing first quarter earnings. Jefferies analyst Jonathan Schildkraut increased his rating of Savvis from Hold to Buy and set a $20 price target for the stock. Schildkraut said he now has "increased confidence in management's '08 outlook." Savvis shares gained $2.79 to $16.43 Wednesday, a gain of 20.5 percent.
In the wake of a vigorous expansion of the company's data center network, analysts have been focused on Savvis' ability to lease space in the new facilities, while continuing to generate revenue from older sites. The company had good news on both fronts.
"We continue to see an attractive fill rate on the new data centers with about 67 percent of the colo space in the Phase I data centers sold," said Savvis CEO Phil Koen. "We also opened the Singapore data center in July, and together with the Boston, Chicago and Dallas data centers, we've sold about 32% of the colo space in those centers. Our expansion IDCs (Internet data centers) continued to generate colo prices averaging just under $70 per square foot per month, while the yield per square foot, including managed hosting and network services is just over $80 per square foot in those centers."
Koen said Savvis was also able to fill its older data centers with power densities of less than 100 watts per square foot. "I think some people have a mistaken idea that these IDCs are in low demand, but in fact they continue to sell at steady pace as we approach the saturation point," he said. "In fact, in Q2, 20 percent of our installs were into our standard powered IDCs and these centers are about 70% utilized today. The high power IDCs comprise roughly a quarter of our sellable square feet and have seen some of the strongest demand so they are about 80 percent utilized today."
Savvis said it continued to extend its Proximity Hosting service, a low-latency automated trading offering for financial industry customers. Savvis launched Proximity Hosting services in London, Chicago and Singapore in the second quarter. The company also announced new or expanded relationships with customers including CMPi, Cognisco, Ellie Mae, iJet and Star Compliance, and extended a key contract with Thomson Reuters.